GM CEO wants to speed up change
In this Dec. 1, 2011 photo, General Motors CEO Dan Akerson is interviewed in New York. Akerson says publicly what other CEOs say in private: he disses competitors' cars and laments his company's lumbering bureaucracy. He's told reporters that Ford should “sprinkle holy water” on its troubled Lincoln luxury brand, and has called Toyota's gas-electric Prius hybrid a “geek-mobile.” His candor often rattles the nerves of GM's public relations staff. (AP Photo/Richard Drew)
NEW YORK, N.Y. - Dan Akerson is hardly a corporate diplomat.
The chairman and chief executive at General Motors Co. says publicly what other CEOs say in private: he disses competitors' cars and laments his company's lumbering bureaucracy. He's told reporters that Ford should "sprinkle holy water" on its troubled Lincoln luxury brand, and has called Toyota's Prius hybrid a "geek-mobile." His candour often rattles the nerves of GM's public relations staff.
And you know what makes him really mad?
"There is a resistance to change," at GM, Akerson recently told The Associated Press.
By all accounts, though, the auto giant is moving at a faster pace under his leadership as he tries to overcome the resistance.
Akerson is not the first to complain about GM's bureaucracy. But for the first time in years, the automaker has somebody at the top with an outsider's vision and a will to make changes to keep profits flowing and return the company to the glory years of a generation ago.
GM now has a lineup of cars and trucks that are selling well, and it has turned a profit for nearly two years straight. The stock, although trading far below analysts' targets, is once again catching the eye of portfolio managers.
Yet for Akerson, who took the CEO job 15 months ago, the work has just begun, and it hasn't gone totally as planned. He's being tested by a federal investigation into battery fires after crash tests in the Chevrolet Volt electric car, and he's grappling to fix GM's high-cost European operations, which are losing money.
Akerson was recruited by the federal government to join GM's board in 2009 just as the company was leaving bankruptcy protection. The government was majority owner at the time, and Akerson thought his management, financial and engineering skills — he's the former head of XO Communications — could help a company so important to the U.S. economy.
The U.S. Naval Academy graduate, who grew up in Minnesota, admits he knew little about cars in the beginning. But now he speaks with authority on everything from transmissions to batteries.
Akerson, who often uses military metaphors, spoke with The Associated Press in New York about the car industry, the economy, his management style and the future of electric cars. Excerpts appear below, edited for length and clarity.
Q: Would you recall all 6,000 Volts to strengthen the battery?
A: If we find that is the solution, we will retrofit every one of them. By the way, if someone wants to sell it back to us now, we'll take that too. We're quite confident that we'll find a solution.
Q: Do you think the news about the Chevy Volt will harm sales of electric vehicles?
A: This car is safe. There is nothing happening immediately after the crash. I think in the interest of General Motors, the industry, the electrification of the car, it's better to get it right now, when you have 6,000 — instead of 60,000 or 600,000 — cars on the road. We're not the only car company that has liquid cooled batteries out there. There are many. So we think this is the right thing to do for our customers, first and foremost, and it was the right thing to do for General Motors and the industry.
Q: Are you moving past the early technology adopters on the Volt at this point, or has any data surprised you on who is actually buying this vehicle?
A: The average purchaser of a Volt is earning $170,000 a year. About a third of the customers haven't been in a Chevy store in more than five years and half have never been in there. They aren't just early adopters.
Some of them — I think roughly half — are either Prius or BMW owners. So one, you could say Prius owners were probably early adopters in the olden days, but that's kind of passed through. But BMW people want styling, good design, and an innovative powertrain, or power source, and I think Volt is a game changer. And quite frankly that's one reason we want to kind of clear the decks here.
As you may remember, in the early days of Lexus, there were real issues surrounding quality. And they called back 8,000, reworked them, and put them back out. People don't remember that because Lexus is a great car, it's a great brand. I think it demonstrated that Toyota was sensitive to their customers' needs, perceptions, and safety, and it was an analog to what we wanted to follow here.
Q: When are we going to see the electric car as the typical family car?
A: We want to ramp Volt production to roughly 60,000 in 2012. I think Prius in its second year did a lot less than that, half. By this summer we will (be in) what I call the second generation, where we will achieve certain scale and we should see an appreciable drop in the cost of the production of the Volt. So, 2011 was kind of a year to get things aligned and make sure that the car was what we hoped it would be. We certainly see that in our showrooms and our sales and Consumer Reports' acceptance.
We clear up this near-term issue hopefully soon so you'll see 60,000. It's an unanswerable question given what I know today, but people ask me and I say, "Well, I would hope by 2020, 10 per cent of the cars sold would be of alternate propulsion." We're also working on hydrogen fuel cell cars which, in the end, are electric as well.
Q: You're gaining market share and your sales are going well. Why is your stock price so far below the initial public offering price? (GM's stock price is currently around a third lower than its IPO price of $33 per share in November 2010.)
A: That's bothering me. But at the same time, our industry — when I look at Ford, I look at us — we're all down about the same amount, within a per cent or two. I don't say that because I take pride in it, it's just sometimes you can't fight city hall or trends in the marketplace.
Last year, when I was on the IPO trip, no one ever said 'sovereign debt issues' to me. I never heard of the word 'contagion' (from European government debt problems) other than about H1N1 (swine) flu. So there are a lot of negative factors here. At the end of the day we sell a consumer product that is somewhat discretionary, and it is an expensive consumer product that's highly complex, has a long product life, hopefully. So I do think there has been a fair degree of concern about what are we going to do and how are we going to do it.
General Motors has made good progress, but we're not nearly what I think we are capable of being. We have a lot of potential. We have a long runway. This is not a quarterly or a yearly project. This is something we're going to do over the next three to five years. We have exceeded (Wall) street expectations so far this year on revenue and profits. I'm proud of that. I'm not happy about the stock, and we're going to do our best to make it better.
But at the end of the day, we need to continue to build great cars that delight — surprise and delight — that have quality, reliability and durability. And in the end, I think it'll all take care of itself.
I have a lot of sleepless nights, but I would say four out of five are on what I would call operational and practitioner issues and the others are about, "Why is the stock not doing better?" But I only can address the things I can manage and I can't manage that.
Q: So you only sleep three nights a week?
A: I rarely sleep past 4:30 or 5. I've always been an early riser but I get up so I can talk to the folks in Asia before they get too far into their day. It's the best job I've ever had. It's the most fascinating industry I've ever been in. When I was in private equity, we saw everything. This is something. You go to the Detroit auto show, you might as well go to a fashion show in Paris, like the runway. I've never been to one of those, but I've watched them on TV. But it's got all of that. The personalities and the egos in the industry, the cars, the shows, and then it's hard-core technology. You've got to worry about supply-chain management. It's complex and interesting and exciting.
Q: How has the corporate culture changed at GM since you joined the board?
A: I would say, objectively, having been in the company in one form or another now for almost two and half years, that 90 per cent of what we did was good. There is tremendous commitment and loyalty to this company. But it's that the 10 per cent or 5 — I don't know how to quantify it precisely — we failed.
Recognize what went wrong, learn from it, move on. The way I describe it to our folks is it's like that squirrel of an uncle you have in your family. You just say, "He's there and we're just going to accept that." I can't change the bankruptcy. It's our interesting past. It's our family collage, if you will. I don't want to obsess on it, but I want to learn from it. And that's the mantra that we have as a team.
So I would say we're making good progress, we're doing surveys on people. What do they see right? What do they see wrong? How do they view the management? We want to know. I want to know. I'm trying to move off the 39th floor. I want to move to the second floor, down with the real people. So in many ways we're trying to change the culture.
I wasn't used to such a command-and-control. I said "We've really got to make Cadillac a global brand." Next thing I know, go to the Geneva (auto) show and we have North American cars, no right-hand drive, no diesel sitting there, and you're going like, "Oh God, why didn't we do that?" ''Well, you said you wanted to make it a global brand." You have to know when to launch, when to attack and when to defend.
You don't have right-hand drive, you don't have diesel, you're no good in Europe.
Q: If you could wave a magic wand, what two things would you change at GM right now?
A: I want a miracle solution on Volt in the next week. That's not going to happen. On a more serious note, it all starts and it ends with product. I want sustainable, differentiable product. The generation that you see for the consuming public today is not just competitive, it's very competitive. We're holding our own. We're taking share. We're profiting.
The second thing is, we've got to make sure that the culture evolves to one that's less hierarchal, flatter, more interactive, more participative. When I was at MCI, if we had 30,000 people in the company, we had 20,000 people who thought they were running the place. They wanted to make decisions. They were proactive. They were angry with senior management if they didn't move quick enough. And we need to instil that, a culture like that — that leans forward all the time rather than leans back.
Q: What makes you the maddest as a CEO?
A: There is a resistance to change. And I don't know about you, but I mean, I'm a much different person — ask my wife — than I was when we got married. We've been married 40 years. We not only look different, and I think we're just as much in love as we were when we first got married, but we changed. Everybody changes.
Every corporation has to change, or it dies. You lose your competitive edge. There's a real strong competitive gene at General Motors. I would say you have to meet the market on its terms, you cannot dictate to the market. I don't like where our stock is. Well, what can I do about it? Execute on the fundamentals and the market will change and appreciate that. But at the end of the day, you have to create a culture that not only accepts change but seeks out how to change. It's critically import that we inculcate that into our culture.
Q: With gas around $3 a gallon in the U.S., are people going to start going back to buying SUVs and trucks?
A: I was really amazed when gas spiked earlier this year and then it dropped 15 cents, and our pickup sales picked right back up. We've got to be prepared for everything. So from midsize down to compact (vehicles), we're going to be really good on mileage and on economy, and that's good. At the same time, if our customers want bigger cars, what are we going to do? Say "Well, we don't want to sell anything other than economy and small cars?" No, we're going to meet the market.
Q: So is there a fundamental shift in Americans' car-buying habits?
A: I think it's going to fluctuate with the price of energy.
Q: So really there's a shift, there's heightened attention paid to mileage, even if it's a massive Silverado, and your new trucks will be more efficient when they come out?
A: Yes. More hybrids.
Q: What do you see happening with auto sales in Europe?
A: It's hard to believe this, but it was only three years ago that I think there were many in this country and around the globe that thought the system was coming off the rails. It's amazing how short our memories are when you bring this up. People are going, "Oh, it wasn't that bad." It was bad. And when you fear for your job, that is uncertainty, and it's a negative bias and it undermines your confidence. If you get over that, then the next level of concern is, "Can I afford to spend anywhere from $20,000 to $50,000 on this consumer product?" And you saw it here. We hit a 40-year low in our sales in the 2008-2009 timeframe.
The Europeans, I think, felt about like we do today: concerned, but not threatened. It was an American problem.
I think the roles are somewhat reversed today. The Europeans are feeling a great sense of insecurity, doubt, and I think their consumer confidence is in question. You can see the sales have fallen off for the entire industry in Europe, and so you have to look at your profitability.
One of my four goals is to be profitable in all of our major regions and areas of operations. Last year, at this time, we were losing money. We restructured given what we thought to be the outlook. We're not going to achieve those sales and revenue numbers, so we have to look at our business operations there.
Q: What about China? What do you see happening in the economy there?
A: The Chinese government, I think, is very concerned with inflation. They're obviously a very active, very viable, economy and they've taken everything from reserve requirements to interest rate actions to try to slow it down. In the two years prior to this year, we grew by 20 to 30 per cent.
That's a very difficult rate to continue to maintain. But if the market's going to grow on the order of 2 to 3 per cent this year and we're going 10, that's fine by me. I do think the Chinese in some ways were prescient in that they saw a bubble creating and they clearly have cooled that down, and I think inflation has dropped off a bit. I think those were prudent actions looking over a longer term. So, I'm cautiously optimistic on Chinese growth and our role in it.
Q: Is there no longer a stigma about going to work at GM?
A: I don't think so. We are getting good young people. People want to work for us. For example, when I got there, when we thought about OnStar, we thought about safety and security. Now we've amalgamated that with infotainment. And it's now starting to draw people out of Silicon Valley and all these people that would make you and me nervous. You know, they come to work, they don't come dressed like we are dressed. Some don't tie their shoes. Some wear different colour ones. It's a different work force.
But you know what, when I get in the car, if I have XM radio, I'm fine. I want ease. They want everything. That's the evolution. It's not a primary buying factor today, but it will be. We studied, and we did this with MTV — this will shock you that we actually retained MTV to come in — they have a market research group to study Millennials.
The old GM would have said, "We got it figured out. We've got a bunch of 55-year-olds that are going to tell us what a 20-year-old wants to buy." We actually set up kind of a home inside the corporate headquarters. We bought Xboxes and everything else. We brought young people in. "What do you do? What do you see? How do you view it?" We wanted to know what drove them. We've got these MTV folks coming out to tell us what are the buying variables and what interests people.
This is a GM that's trying to connect on where the customer wants to be met. So we've got to change not only our cars and how we offer them, how we distribute them, but how does the customer view us?
Q: You have been pushing the culture to speed up product rollouts, and you got the push back from your engineering staff, concerned about quality. Do you think you might have pushed too hard? The Volt did well in Consumer Reports satisfaction surveys, but in the general overall reliability, GM didn't do that well.
A: No. In fairness, I've been in the job (15) months, so anything I accelerated hasn't seen the light of day.
(The New) Malibu, when we did our consumer research, it was spectacular. A third of the people, when we unbadged it, thought it was a BMW, not that I want to be a BMW, but it gives you an idea of the perception. From stability and control it outperformed some of our European competitors. This is a Malibu, Chevrolet.
It comes out in January. We've shown it at the auto shows. So I wanted to move it up six-to-eight months. So it had to go through all of our quality gates. So I said, "If it launches in Korea in November, why don't we do it in December or January here" This is where we see the biggest threat, because if I continue to produce old Malibu, I'm going to have to incent (discount it). I start affecting my (resale values). There's this delicate biosphere that you have to manage.
Before, the engineers wouldn't worry about it. They said if we move it up, we're going to have to write off the tooling, the plant and equipment down in Fairfax (Kansas). You're going to have to do that in midyear, why not do it earlier? Or we can incent, the estimate was, we could incent to the return of a couple hundred million dollars to hold old Malibu. And you start saying, this is where you have to make the transition to change from a manufacturing culture to a multi-dimensional culture that says "Hey, look, in the marketplace we have to be competitive first and foremost."
I'm never going to give up on quality. Never, never, never. I'm never going to sacrifice safety. I hope that's been communicated in a couple of different ways
If we had got attacked on Dec. 7th, 1942, we probably would've approached the war a little bit differently than in 1941. You have to adjust to what's happening in the real world, not just say "I've got a plan of record" — that's GM-ese for "I don't want to change" — and the plan of record is generally set out years in advance. You have to allow for events that occur between point A and five years later. So we are not compromising on anything.
Q: Is there anything you wish you'd done differently since coming to GM?
A: It's never too late. At the (military) service academies, they'll constantly harp on this. You're constantly re-evaluating decisions of the past. So if I have made a bad decision, I hope I immediately mitigated it by saying, "Wait a minute, stop, back up. Go back to, in the physical world, the fork in the road. That was wrong. Go down left."
I think it's foolish, if not arrogant, to say, "Today I know everything and I'll learn nothing between now and a month from now or a week from now."
I'm always re-evaluating. It's not to say I want to be kind of a 'Ricochet Rabbit' and change directions. But if you see compelling information that fundamentally changes, you must change.
Q: How long do you plan on staying at GM?
A: I bought a condo in Detroit. I like the company. I like the city. I like the industry and I guess as long as I'm having fun and the board wants me, the management is willing to follow, I'll stay.
Auto Writer Bree Fowler in New York contributed to this report.
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